Small Businesses Denied Government Contracts

Darren Dahl is a contributing editor at Inc. magazine, which he has written for since 2004. He also works as a collaborative writer and editor and has partnered with several high-profile authors. Dahl lives in Asheville, North Carolina.

Contributing Editor, Inc.

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Oct. 15, 2004--As the countdown towards the presidential election continues, House Democrats continue to criticize the way the Bush Administration treats small businesses.

In their end-of-the-year report issued on Sept. 30 -- called "Scorecard V" -- the House Democratic Small Business Committee graded 22 federal agencies on how they met their mandated small business goals.

The report concluded that, despite record spending levels, the government has failed to provide small businesses with 23% of its contracts for the fourth year in a row. Government agencies awarded only 22.7% of the $300 billion they spent on good and services over the past fiscal year.

In its report, the committee said that, "while a shortfall of less than one percentage point may not appear significant, it translates into nearly $1 billion in lost contract opportunities for U.S. small businesses."

In total, the committee handed out no A's and seven failing grades -- 40% of the total -- to agencies like the Small Business Administration that fell short in awarding a fair percentage of their contracts to small businesses. The seven failing grades were the worst result in the five years that the Scorecard has been issued.

"The increase in the number of agencies failing to achieve their small business goals reinforces concerns that obstacles continue to hinder the ability of small companies to receive their fair share of federal contracts," the report said.

The committee cited a practice known as "contract bundling" as the number one barrier for small businesses in landing government contracts. The Defense Department has been singled out as one of the worst offenders of bundling, where smaller contracts are cobbled together to create larger ones that small businesses lack the capital or wherewithal to bid on. A study by the Center for Public Integrity also found that 40% of the $900 billion the Pentagon spent on contracts was awarded to big defense contractors without competitive bidding.